Nigeria’s Economy in Trouble as China Reduces Lending to Africa

Nigeria’s Economy in Trouble as China Reduces Lending to Africa

  • China has announced that it is scaling back lending to African countries amid global rising interest rates
  • Reports say some African countries are having currency troubles, and some are already in default
  • China is Nigeria’s biggest lender, with a total indebtedness of $3.9 billion as of June 30, 2022

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One of Nigeria’s biggest creditors, China, is said to be slowing down on lending in Africa amid worsening growth problems.

China’s decisions come amid rising global interest rates and dwindling liquidity.

China, Loans, Africa, Nigeria
Chinese President, Xi Jingping and President Muhammadu Buhari Credit: Pool / Pool
Source: Getty Images

China is Nigeria's biggest lender

Bloomberg said that African countries like Ghana and Zambia and some currencies, including the South African rand, are at their pandemic lows.

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According to the Debt Management Office (DMO), Nigeria’s indebtedness to China stands at 83.57 per cent of its bilateral debt as of June 30, 2022, which totals $3.9 billion, an increase of 12.7 per cent from $3.5 billion in the same period of 2021.

Changing debt dynamics with China threatened to force unwilling governments into the arms of the International Monetary Fund (IMF) and the World Bank for the balance of payment support.

Analysts have predicted that the recent decision by Beijing is not suitable for African countries with shallow local markets and slim policy and market shock absorbers.

According to them, China’s reluctance in debt restructuring and easing its lending conditions is bound to increase the vulnerabilities of some economies in Africa.

African countries with highest debt to China

Data from Boston University Global Development Policy Centre states that in the last decade, the top 10 recipients of Chinese loans have been Angola, Zambia, Ethiopia, Kenya, Egypt, Nigeria, Cameroon, South Africa, DRC Congo and Ghana.

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Bloomberg says that the rating agency, JP Morgan Chase, has flagged Ethiopia as having high repayment risk and under threat of reserve depletion by the end of 2023.

Zambia, which has defaulted on its Eurobonds and Ghana have asked for IMF bailouts that may include debt restructuring, and Egypt is seeking a new loan.

What Chinese loans are used for

Nigeria’s debt management office said that Chinese loans are used to finance infrastructure projects in the country.

As of March 31, 2020, some of the projects include the Nigerian Railway Modernisation Project (Idu-Kaduna section), Abuja Light Rail, four airport terminal expansion projects in Abuja, Kano, Lagos and Port-Harcourt.

Others are railway modernisation projects such as the Lagos-Ibadan section and the rehabilitation and upgrading of the Abuja-Keffi-Makurdi Road project.

The list of African countries with highest debt to China, amount and what the debts are used for reported that Macau is the only country in the world that is debt-free, according to the International Monetary Fund (IMF).

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The world’s greatest economies rank among the 20 countries with the highest external debts.

They are the US, Russia, United Kingdom, France, Germany, Japan and China, according to a Daily Trust report.


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